What are Implied Contracts: Key Elements, Types & Examples
An implied contract arises when two parties’ actions establish legal obligations, even without a written or spoken agreement.
- Actions can establish a binding agreement without a signed document.
- Implied-in-fact contracts arise from conduct, while implied-in-law obligations prevent unjust enrichment.
- Courts examine actions, payments, services, and past dealings.
- Documented terms, approvals, and organized records help prevent disputes.
For example, when a company accepts services from a vendor and benefits from the work, it may have to pay for those services, even without a signed contract. This is where an implied promise becomes important.
According to a study by World Commerce & Contracting, poor contract management can cost businesses an average of 8.6% of contract value. While this figure covers contract management as a whole, it shows why businesses need to understand the duties that can arise from their agreements and actions.
In this blog, we explain the meaning, elements, types, formation, examples, and legal enforcement of implied agreements.
What Is an Implied Contract?
It is a legally binding agreement created through the actions, behavior, or circumstances of the parties involved rather than through clearly stated written or spoken terms.
It can exist when two parties act in a way that shows they understand and accept certain contract obligations.
For example, a business hires a cleaning service every month. The cleaner completes the work, and the business pays the agreed amount. Even if the parties never sign a formal document, their repeated actions may show that they have an agreement.
What Does an Implied Agreement Mean in Business?
In business, an unspoken agreement may develop when one company provides goods or services and another company accepts them under circumstances that show an expectation of payment.
These situations often involve:
- Vendors providing services based on previous dealings.
- Employers making commitments through established workplace practices.
- Customers accepting products with an understanding that payment is required.
- Businesses continuing services after a written agreement expires.
For example, a supplier regularly delivers materials to a manufacturer. The manufacturer accepts the goods and pays the invoices. This pattern may support the existence of an agreement even when no new purchase order is signed.
What Are the Elements of an Implied Contract?
An implied-in-fact contract generally requires the same legal elements as an explicit agrements. The difference is that consent is inferred from the parties’ actions and surrounding circumstances rather than explicit statements.
Mutual Agreement Through Conduct
Both parties’ actions must reasonably indicate agreement. One party’s personal belief alone is insufficient; the circumstances must support mutual consent.
Offer and Acceptance
An offer must be accepted, either explicitly or through conduct. In an implied contract, the parties’ actions may demonstrate contract acceptance without formal signatures.
Consideration or Exchange of Value
The parties generally exchange something of contract value, such as money, goods, or services. This requirement applies to implied-in-fact contracts but not to implied-in-law obligations.
Intention to Create Legal Obligations
The circumstances must indicate an intention to establish a legally binding arrangement rather than a casual or social understanding. Courts assess the parties’ conduct and relationship to determine this intention.
Legal Capacity and Lawful Purpose
The parties must have the legal capacity to enter the agreement, and its purpose must be lawful. Certain transactions may also require written documentation under applicable law.
These elements help courts determine whether an implied-in-fact contract exists and whether a legal remedy may be available.
Types of Implied Contracts
Implicit agreement are generally classified into two types: implied-in-fact contracts, which arise from the parties’ conduct, and implied-in-law contracts, which are imposed by courts to prevent unjust enrichment.
Aspect | Implied-in-Fact | Implied-in-Law |
Basis | Actions showing agreement | Legal duty imposed by a court |
Mutual consent | Required | Not required |
Consideration | Generally required | Not required as a contract element |
Main purpose | Enforce an actual agreement | Prevent unjust enrichment |
Common example | Regular paid services | Compensation for a benefit unfairly retained |
Legal remedy | Contract damages | Restitution, when available |
An implied-in-fact contract develops when the actions of the parties show that they have reached an agreement.
The parties may not discuss every term, but their behavior provides evidence of mutual consent.
Example:
A marketing agency manages a company’s social media accounts every month. The company reviews the contract, accepts the reports, and pays the agency.
After several months, the agency continues providing the same service without signing a new document.
Depending on the circumstances, this conduct may support an implied-in-fact agreement.
Key characteristics:
- The parties show agreement through their actions.
- Both sides understand the expected exchange.
- The arrangement may include terms established through past dealings.
- A court can enforce it when the required legal elements are present.
These contracts commonly appear in ongoing service relationships, vendor contracts, and certain employment situations.
An implied-in-law contract, also called a quasi-contract, is not a true agreement between the parties.
Instead, a court may impose a duty to pay or return a benefit when keeping that benefit without compensation would be unfair.
This legal remedy often involves the principle of unjust enrichment.
Example: A company receives emergency IT support that prevents a major system outage, even though no formal agreement was in place. If the legal requirements are met, a court may require the company to pay for the reasonable value of the services.
The outcome depends on the circumstances and applicable law.
Key characteristics
- Mutual agreement is not required.
- The obligation arises under legal principles, not consent.
- The purpose is to prevent unjust enrichment.
How Are Implied Contracts Formed?
An unspoken agreement forms when the actions of two parties show an understanding, even without a formal written or spoken agreement. The parties’ conduct and the surrounding circumstances help establish their responsibilities.
Step 1: A Service Is Requested
The contract lifecycle process often begins when one party requests a service or goods. Implied contracts helps establish the purpose of the arrangement and what the parties expect.
Step 2: The Other Party Accepts
The other party performs the requested work or delivers the goods. Their actions, along with the first party’s response.
Step 3: Value Is Exchanged
One party provides goods or services, while the other pays or is expected to pay for them. This exchange may help establish the basis of an implied promise.
Step 4: Past Dealings Clarify Terms
Previous transactions may help explain the parties’ expectations regarding contract deliverables, responsibilities, and other terms. However, past dealings alone do not prove that the same terms apply to every new transaction.
Step 5: Legal Obligations Are Established
If the required legal elements are present, a court may recognize the arrangement as an implied contract. However, receiving an unsolicited service does not automatically create an obligation to pay.
Businesses can reduce disputes by keeping clear service requests, approval records, invoices, and payment details to document their expectations and responsibilities.
Less time chasing contracts. More time moving business forward.
CLM 365 helps teams simplify reviews, coordinate approvals, and keep agreements moving from draft to execution.
Examples of Implied Contracts
Implicit agreement can arise in everyday transactions and business relationships when actions suggest an agreement. Here are seven common examples.
Restaurant Services
A customer orders and eats a meal, creating an understanding that they will pay. This is a common example of an implied-in-fact contract.
Employment Relationships
An employer consistently follows certain workplace policies. Depending on applicable state law and the circumstances, these practices may create implied obligations toward employees.
Medical Treatment
A patient requests and receives medical care. The circumstances may imply an obligation to pay for the services, subject to applicable law.
Freelance and Consulting Work
A business assigns work to a freelancer who completes it with the expectation of payment. Their conduct and previous dealings may establish an implied agreement.
Property Maintenance Services
A property manager accepts maintenance services from a contractor. Their conduct and established business relationship may indicate an agreement to pay.
Subscription Services After Expiration
A software provider continues delivering services after a contract expires, and the customer continues using them. Depending on the original terms and subsequent conduct, an implied arrangement may arise.
Emergency Repair Work
A contractor performs urgent repairs that benefit a property owner. If the legal requirements are met, the owner may owe reasonable compensation under restitution principles, even without an actual agreement.
These examples show how business activities can create implied undertakings, making clear communication and proper recordkeeping important.
What's the Difference Between an Express Contract and an Implied Contract?
Express contracts and Implied agreements are both legally recognized agreements, but they differ in how the parties communicate their consent and establish the terms.
Aspect | Express Contract | Implied Contract |
Meaning | Terms are directly stated | Terms are understood from conduct or circumstances |
Formation | Created through spoken or written agreement | Created through actions or, for quasi-contracts, imposed by law |
Communication | Parties clearly communicate their commitments | Conduct may show acceptance without direct statements |
Documentation | May have a written record | May exist without a formal document |
Mutual consent | Required | Required for implied-in-fact, not implied-in-law |
Evidence | Written terms, messages, or spoken statements | Behavior, transactions, payment history, and surrounding facts |
Legal validity | Binding when legal requirements are met | Implied-in-fact agreements can be binding; quasi-contracts provide legal remedies |
Example | A signed maintenance agreement | A company regularly accepts and pays for maintenance services |
Main challenge | Disputes over the meaning of stated terms | Proving that an agreement existed and identifying its terms |
Written express agreements are generally safer for important business transactions because they clearly define pricing, responsibilities, liability, and payment terms.
Implied agreements may suit routine transactions where formal documentation is impractical. However, businesses should avoid relying on conduct alone for high-value purchases, long-term partnerships, or complex services, as unclear terms can lead to contract disputes.
How Are Implied Contracts Enforced?
Courts may enforce an contract when the evidence supports a valid legal claim. Implied-in-fact contracts require proof of mutual agreement, while implied-in-law claims focus on preventing unjust enrichment.
1. Establish the Agreement
For an implied-in-fact claim, the claimant must show that the parties’ actions demonstrated mutual consent, acceptance, and an exchange of value.
2. Collect Supporting Evidence
Relevant records may include emails, invoices, payment history, delivery receipts, service reports, and messages confirming business expectations. Courts consider the overall circumstances when assessing the claim.
3. Identify the Breach or Unpaid Benefit
The claimant must generally show that the other party failed to meet an obligation or unfairly retained a benefit without compensation. An unpaid invoice alone does not establish a valid claim.
4. Determine the Legal Remedy
Depending on the claim and applicable law, a court may award damages for breach of an implied-in-fact contract or restitution for the contract value of an unfairly retained benefit.
5. Consider Legal Limitations
Some agreements must be in writing, and existing contracts may limit certain claims. Applicable laws also determine filing deadlines and available remedies.
Businesses should maintain clear records and seek legal advice when disputes arise over unwritten commitments.
Best Practices to Manage Implicit Agreement
Clear communication and proper documentation help businesses manage Implied promise and reduce issues.
- Never Assume Silence Means Agreement: Confirm that both parties understand their responsibilities before work begins. Silence or inaction does not automatically establish consent.
- Document Every Business Commitment: Keep emails, meeting notes, and messages that clarify what was discussed, agreed upon, and expected from each party.
- Confirm Commercial Terms Early: Clarify pricing, payment deadlines, deliverables, and liability before accepting services or allowing work to proceed.
- Review Past Transactions Carefully: Previous dealings can help establish contract duration, but do not assume they automatically apply to every new transaction.
- Track Performance and Payments: Monitor deliverables, service completion, invoices, and outstanding payments to identify disagreements before they escalate.
- Formalize High-Risk Arrangements: Use written contracts for high-value transactions, long-term partnerships, and services involving significant financial or legal exposure.
- Maintain a Clear Audit Trail: Store approvals, communications, invoices, and related documents in a contract repository so the business can establish what happened if a dispute arises.
Handle Your Entire Contract Lifecycle in One Place
Managing implied contracts involves more than collecting signatures. Legal, sales, procurement, and finance teams must track agreements from the first request through approval, execution, renewal, and closure.
When teams depend on emails, shared folders, and spreadsheets, important details can get lost. This becomes a bigger concern when business activities continue beyond the terms of an existing agreement.
CLM 365 helps businesses manage their contract lifecycle in one place while working within their existing Microsoft 365 environment.
Explore how SharePoint contract management can improve visibility and maintain better control over agreements throughout their lifecycle.
Frequently Asked Questions
Is an implied contract the same as an oral contract?
No. An oral contract is formed through spoken words, while an implied contract is inferred from conduct and surrounding circumstances.
Are all the terms of an implied contract clearly defined?
No. Some terms may be inferred from the parties’ conduct, previous dealings, and business practices. Unclear terms can make disputes harder to resolve.
What are the biggest risks of implied contracts for businesses?
The main risks are unclear pricing, disputed responsibilities, uncertain deadlines, disagreements over liability, and difficulty proving what each party accepted.
What causes delays in the contract approval process?
Delays often occur when approvals depend on email follow-ups, reviewers are unclear, contract terms change without notice, or legal teams lack visibility into pending requests.
What contract details should businesses track in a repository?
Important details include the counterparty, contract type, effective date, expiry date, contract value, payment terms, renewal conditions, obligations, and responsible business owner.
